Cyprus gov't coffers risk running dry by December

NICOSIA, Oct. 30 (Xinhua) -- The government of Cyprus may have difficulties in paying salaries to its public employees in December unless it concludes a bailout deal with international lenders, local media reported on Tuesday.

The usually well informed newspaper "Politis" ("Citizen") quoted Finance Minister Vassos Shiarly as saying that without a bailout deal, the government would rely on the goodwill of bankers to meet the December payroll.

"We may have difficulties in December. Nothing can be absolute, but no predictions can be made, because no banker would undertake a commitment on financing three months earlier, even when things were good," Shiarly said.

Shiarly made the speech in a confidential meeting with the leaders of parliamentary parties on October 3. The minutes of the meeting had not been reported until Tuesday.

Cyprus has turned to the European Union (EU) and the International Monetary Fund (IMF) for financial assistance to recapitalize its main banks, heavily hit by the write-down of the Greek debt.

Cyprus planned to conclude a financial adjustment program with negotiators from the Troika of the European Commission, the European Central Bank and the International Monetary Fund before November 12.

Meeting that deadline was considered crucial as a eurozone ministerial meeting has been scheduled for November 12 to endorse bailout agreements for Spain, Greece and Cyprus.

Unofficial negotiations are still underway through video conference, which have managed to narrow down differences on most outstanding issues. However, no date has yet been fixed for the return of the negotiators in Cyprus.

Cyprus's state radio said Shiarly was instructed by President Demetris Christofias in their meeting on Tuesday to continue negotiations on issues over which Cyprus and Troika have different views.

The divergence of their views centers on the amount needed for the recapitalization of the banks, the extension of the control by the Central Bank to co-operative banks, reform of pensions and the scrapping of a salary system wedded to inflation.

The two sides also disagreed on how to generate a total of almost one billion euros (1.29 billion U.S. dollars) in savings.

The government has proposed most of the money to come partly from increased taxation and partly from staggered cuts in salaries, but the Troika is insisting on bigger uniform cuts in salaries and pensions.